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(09-02-2015, 05:15 PM)tanjm Wrote: North American shale oil production is up to about 8m barrels a day (bpd) versus a 2m bpd gap in supply over demand
tanjm san
According to EIA, tight oil (aka shale oil) production in North America (including Canada) is only about 4 million + barrels per day.
(09-02-2015, 05:15 PM)tanjm Wrote: with $65 per barrel production being economical at about 6m bpd production. This assumes no fresh supply at a lower cost of production.
The common mistake is to treat oil production like production of normal consumer goods such as iphones but some of the key points I can think of are:
Oil wells suffer from production declines
Conventional oil production declines without additional capex. The average annual decline rate in approximately 8%-10%. Tight oil wells' annual production decline rate is approx 40%-60%.
Oil price is above cash costs
At the present moment, I have not heard of any oil company who has stopped production from existing oil wells as the oil price is still above cash costs. The more immediate response is to cut capex which affects future production. Therefore, we will see a lagged effect between cut in capex and a decline in oil production.
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(10-02-2015, 08:24 AM)HitandRun Wrote: (09-02-2015, 08:16 PM)bear Wrote: It seems that the speculators and traders are already seriously considering pooling their resources in oil storage facilities in anticipation of the rising oil prices by the end of the year.
Brilliant or overconfident?
Bear san
You are mistaken. This trade is almost risk free in that they are fully hedged. They are just using the contango to make some money.....
Yes, I concur.
In case you don't know the "contango", I include the definition below. As an amateur, the risk seems only on the storage, before the delivery...
contango: the spot or cash price of a commodity is lower than the forward price.
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Amature's View:-
Contango now, so buy and store will make money in future for physical traders. Can contango becomes "tango" (new term opposite of contango)? Then what happens?
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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(10-02-2015, 10:21 AM)Temperament Wrote: Amature's View:-
Contango now, so buy and store will make money in future for physical traders. Can contango becomes "tango" (new term opposite of contango)? Then what happens?
It should be "buy and secure a forward contract now, store it, and delivery later". It is no risk of "tango", I reckon. Uncle Temp... 
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(10-02-2015, 10:21 AM)Temperament Wrote: Amature's View:-
Contango now, so buy and store will make money in future for physical traders. Can contango becomes "tango" (new term opposite of contango)? Then what happens?
Uncle Temperament
Opposite of contango is not tango or salsa, it's backwardation.
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Petronas is having a orderly change of leadership, a vastly different from Brazil's Petrobras case...
Petronas in leadership change as oil slide hits Malayasia
KUALA LUMPUR (Feb 10): Malaysia named Wan Zulkiflee Wan Ariffin, a long-time company veteran, to lead its state oil producer, handing him the job of dealing with the slump in crude prices that’s eating into revenue the government needs to narrow its budget deficit.
...
http://www.theedgemarkets.com/sg/article...-malayasia
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Another forecast, "could fall to the US$20 range for a while" in the report, but the headline has given an impression of long term sustainable price...
Anyway, the Citi forecast is very close to IMF/World Bank for 2015..
Oil could plunge to US$20, and this might be 'the end of OPEC': Citi
NEW YORK (Feb 10): The recent surge in oil prices is just a "head-fake", and oil as cheap as US$20 a barrel may soon be on the way, Citigroup said in a report on Monday as it lowered its forecast for crude.
Despite global declines in spending that have driven up oil prices in recent weeks, oil production in the US is still rising, wrote Edward Morse, Citigroup's global head of commodity research.
Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia.
The market is oversupplied, and storage tanks are topping out.
A pullback in production isn't likely until the third quarter, Morse said.
In the meantime, West Texas Intermediate Crude, which currently trades at around US$52 a barrel, could fall to the US$20 range "for a while", according to the report.
The US shale-oil revolution has broken OPEC's ability to manipulate prices and maximize profits for oil-producing countries.
"It looks exceedingly unlikely for OPEC to return to its old way of doing business," Morse wrote.
"While many analysts have seen in past market crises 'the end of OPEC', this time around might well be different," Morse said.
Citi reduced its annual forecast for Brent crude for the second time in 2015.
Prices in the US$45-US$55 range are unsustainable and will trigger "disinvestment from oil" and a fourth-quarter rebound to US$75 a barrel, according to the report.
Prices this year will likely average US$54 a barrel.
http://www.theedgemarkets.com/sg/article...-opec-citi
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I don't know much about the Chinese tycoon, but he might be right to buy more at cheap...
Chinese tycoon Tong boosts Seadrill stake past 5% amid oil crash
OSLO (Feb 10): Chinese property tycoon Tong Jinquan increased his stake in billionaire John Fredriksen’s offshore driller Seadrill to 5.2 percent after the stock plunged 70 percent since June.
Tong’s wholly owned Wealthy Fountain Holdings bought 1.3 million Seadrill shares at US$13.26 apiece on Feb 6, the Hamilton, Bermuda-based company said in a statement.
Wealthy Fountain now owns 4.3 percent of Seadrill, bringing the total stake held by all Tong’s companies in the driller to 5.2 percent.
Seadrill has slumped as the biggest decline in crude prices since 2008 led oil companies to cut investments, weakening the market for drilling services. The third-biggest offshore driller by market value suspended dividends in November.
Tong is chairman of Shanghai Summit Property Development, which has among its reported holdings a 62.1 percent stake in Viva Industrial Trust, acquired in the Singapore real-estate trust’s initial public offering in 2013.
http://www.theedgemarkets.com/sg/article...-oil-crash
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(10-02-2015, 11:04 AM)HitandRun Wrote: (10-02-2015, 10:21 AM)Temperament Wrote: Amature's View:-
Contango now, so buy and store will make money in future for physical traders. Can contango becomes "tango" (new term opposite of contango)? Then what happens?
Uncle Temperament
Opposite of contango is not tango or salsa, it's backwardation. Sorry! i just want to put it in a fun(ny) way. You know investing can be very boring after sometime. " Money, Money, Money, can be funny; in a richman's world."
Cheers.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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10-02-2015, 12:01 PM
(This post was last modified: 10-02-2015, 12:09 PM by tanjm.)
(10-02-2015, 09:03 AM)HitandRun Wrote: (09-02-2015, 05:15 PM)tanjm Wrote: North American shale oil production is up to about 8m barrels a day (bpd) versus a 2m bpd gap in supply over demand
tanjm san
According to EIA, tight oil (aka shale oil) production in North America (including Canada) is only about 4 million + barrels per day.
(09-02-2015, 05:15 PM)tanjm Wrote: with $65 per barrel production being economical at about 6m bpd production. This assumes no fresh supply at a lower cost of production.
The common mistake is to treat oil production like production of normal consumer goods such as iphones but some of the key points I can think of are:
Oil wells suffer from production declines
Conventional oil production declines without additional capex. The average annual decline rate in approximately 8%-10%. Tight oil wells' annual production decline rate is approx 40%-60%.
Oil price is above cash costs
At the present moment, I have not heard of any oil company who has stopped production from existing oil wells as the oil price is still above cash costs. The more immediate response is to cut capex which affects future production. Therefore, we will see a lagged effect between cut in capex and a decline in oil production.
Actually, I don't take my own forecast that seriously. That's why I used the word "Crystal Ball" (in an ironical manner).
But to address your reply...
My mis-statement here : the original link I posted refers to all crude oil output in North America. But the cumulative production cost curve in the article is dominated by shale oil on the costliest (right hand side) of the chart.
I just treat shale oil as a "swing producer" because it is quick to react to market events (both on upside and downside). I am just saying it looks like shale oil can relatively quickly turnaround within a 2m bpd range based on that article. So a 60-65 per barrel price seems believable if other factors do not change (such as demand and/or other supply).
Unambiguous estimates of tight oil production seem to be resistant to a google search curiously enough. The link below seems to indicate US (only) tight oil production is 5.2m bpd.
http://www.channelnewsasia.com/news/busi...48196.html
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